IDT
Annual Report 2023

Plain-text annual report

IDT AUSTRALIA LIMITED ACN 006 522 970 Annual Report For the Year ended 30 June 2023 IDT Australia Limited Letter from Chair and Chief Executive Officer 30 June 2023 We are pleased to present the Annual Report for IDT Australia Limited (IDT) for the year ended 30 June 2023 with our Company reporting early positive signs that the strategic pivot initiated over the past year is paying off. This is demonstrated in the growth of our three key business verticals in the financial year 2023 (FY23), which we regard as a more accurate reflection of IDT’s operational performance. While total statutory revenue declined by 42% over the previous corresponding period (pcp) to $7 million, revenue from the key verticals, which include Active Pharmaceutical Ingredients (API), Specialty Orals and Advanced Therapies, have increased by 25% over the pcp to $6.4 million. Additionally, the number of commercial contracts has reached the highest since FY21 – a clear indication that our turnaround strategy is gaining strong market traction and stimulating demand for our unique offering. It’s worth noting that the previous year’s results were skewed by government payments related to COVID-19 worth circa $6 million, which makes comparing the two years’ results less than straight forward. Embracing New Market Opportunities Moving forward, the growth path ahead for IDT is clear and well defined. The strategic transformation program allows our Company to leverage our established expertise and capitalise on emerging opportunities within rapidly expanding markets. These include the emerging psychedelic therapies market for treatment-resistant depression and the fast growing medicinal cannabis market, which is now subject to tighter regulatory standards which gives IDT a significant advantage in a competitive market. Our Specialty Orals vertical stands to benefit from these advancements. Another key achievement during the financial year was securing the sterile license extension that enables IDT’s Advanced Therapies vertical to scale up production and supply drugs for clinical trials. Our Advanced Therapies sterile facility is one of a few of its kind in the region that can produce cutting edge medications, such as those used in the latest cancer treatments. Simultaneously, the successful establishment of our Specialty Orals and Advanced Therapies verticals, which oversee the production of finished dosage forms (FDFs), has breathed new life into our API business. This business division contributes the essential ingredient for FDFs. With increasing demand for comprehensive manufacturing solutions, IDT's integrated approach minimises the risks associated with clients using multiple manufacturing partners. Positioned for Further Growth The early success of IDT’s strategic pivot provides a solid foundation for continued success in the new financial year and beyond. The investments we made in FY23 as part of the business reset has enabled IDT to substantially grow the pipeline of potential sales leads across all three verticals. The recent $7 million capital raise via a share placement to institutional and sophisticated investors and share purchase plan to existing shareholders ensures the Company is well-funded to execute on its turnaround strategy. These achievements give us confidence in the outlook for IDT. We are excited about what the next 12 months will deliver as the Company is well placed to return to growth, and we hope that investors will share our enthusiasm for the promising future ahead. On behalf of the board and management, we also like to take the opportunity to thank shareholders for their patience and continued support as we embark on an exciting and new phase of growth for IDT. Mark Simari Chairman Paul McDonald Chief Executive Officer 1 IDT Australia Limited Contents 30 June 2023 Corporate directory Directors' report Auditor's independence declaration Statement of profit or loss and other comprehensive income Statement of financial position Statement of changes in equity Statement of cash flows Notes to the financial statements Directors' declaration Independent auditor's review report to the members of IDT Australia Limited Shareholder information 3 4 16 17 18 19 20 21 40 41 45 2 IDT Australia Limited Corporate directory 30 June 2023 Directors Mark Simari - Executive Chairman Geoffrey Sam, OAM - Non-Executive Director Jane Ryan - Non-Executive Director Company Secretary Mark Licciardo Notice of annual general meeting The details of the annual general meeting of IDT Australia Limited are: Registered Office and Principal Place of Business Share Register Auditor Bankers 45 Wadhurst Drive BORONIA, VICTORIA, 3155 Telephone +61 3 9801 8888 Facsimile +61 3 9837 6445 Link Market Services Limited Tower 4, 727 Collins Street MELBOURNE, VICTORIA, 3008 Grant Thornton Audit Pty Ltd Tower 5, Collins Square 727 Collins Street Melbourne VIC 3008 National Australia Bank Limited Level 28, 500 Bourke Street, MELBOURNE, VICTORIA, 3000 Stock exchange listing IDT Australia Limited shares are listed on the Australian Securities Exchange (ASX code: IDT) Website www.idtaus.com.au 3 IDT Australia Limited Directors' report 30 June 2023 The directors present their report, together with the financial statements for IDT Australia Limited (referred to hereafter as the 'Company') for the year ended 30 June 2023. Directors and Company Secretary The following persons were directors of the Company during the whole of the financial year and up to the date of this report, unless otherwise stated: Director Mark Simari - Chair Jane Ryan - Non-Executive Director Geoffrey Sam - Non-Executive Director Alan Fisher – Chair Michael Kotsanis - Non-Executive Director Hugh Burrill - Non-Executive Director Company Secretary Mark Licciardo Ancila Desai Comment Appointed as Non-Executive Director 10 October 2022 and subsequently appointed Chair 1 January 2023 Appointed 10 October 2022 Resigned 31 December 2022 Resigned 28 November 2022 Resigned 10 October 2022 Comment Appointed 3 October 2022 Resigned 2 October 2022 Information about the Directors holding office at 30 June 2023: Mark Simari Qualifications: Bachelor of Business (Accounting) Experience: Mark is an experienced and accomplished professional in the health industry and has over 15 years’ Board experience in a diverse range of organisations. Mark is currently Chairman of Careteq Limited (ASX:CTQ), Tali Digital Limited (ASX: TD1) and was the co-Founder of Paragon Care (ASX:PGC) and Managing Director from 2008 to 2018 and recently Non-executive Director from 2019 to 2022. He was instrumental in Paragon Care becoming one of the largest independent healthcare suppliers in the Australian and New Zealand Markets, creating a healthcare platform spanning across capital equipment, consumables, devices and service and maintenance. Other Current Directorships: Executive Director of Careteq Limited and Non-Executive Director of Tali Digital Limited. Former Directorships in Last 3 Years: Non-Executive Director of Paragon Care Ltd. Responsibilities: Non-Executive Chairman of the Board, Chairman of Audit & Risk Committee, Member of Remuneration and Nomination Committee. Equity interests in Company: 585,976 Fully Paid Ordinary Shares Jane Ryan Qualifications: BSc (Hons) PhD, MAICD Experience: Dr Jane Ryan has over 30 years of international experience in the pharmaceutical and biotechnology industries where she has held executive roles in management of research and development programs as well as business development and alliance management. Jane has worked in Australia, the United States and United Kingdom. Throughout her career, she has led many successful fundraising campaigns and licensing initiatives including the winning of a $230 million US Government contract. Other Current Directorships: Non-Executive Director of Anatara Lifesciences Ltd and Bionomics Ltd. Former Directorships in Last 3 Years: Non-Executive Director of Robotic Surgery Evolutions Ltd Responsibilities: Non-Executive Director, Chair of Remuneration and Nomination Committee, Member of Audit & Risk Committee Equity interests in Company: 79,366 Fully Paid Ordinary Shares 4 IDT Australia Limited Directors' report 30 June 2023 Geoffrey Sam OAM Qualifications: BCom (UNSW), MHA (UNSW), MA (Econ&SocStudies) (Manchester UK), FAICD Experience: Geoff is currently the Chairperson and independent Non-executive Director of Earlypay Ltd (ASX:EPY) and independent Non-executive Director of Paragon Care Ltd (ASX:PGC). He has also held previous independent Non-executive Board positions with listed companies Money 3 Ltd, Hutchinsons Childcare Services Ltd and was Managing Director of Nova Health Ltd. He is the Co-Founder and Board member of Healthe Care Australia Pty Ltd, a privately owned health care company comprising a portfolio of 18 hospitals. Other Current Directorships: Non-Executive Director of Earlypay Ltd, Paragon Care Ltd and Change Financial Ltd. Former Directorships in Last 3 Years: Nil Responsibilities: Non-Executive Director, Member of Audit & Risk Committee, Member of Remuneration and Nomination Committee. Equity interests in Company: 816,745 Fully Paid Ordinary Shares Information about the Secretary Mark Licciardo Qualifications: Bachelor of Business degree in accounting, Graduate Diploma in Governance and Fellow of the Chartered Governance Institute, the Governance Institute of Australia and the Australian Institute of Company Directors. Experience: Mark Licciardo is the founder of Mertons Corporate Services, now part of Acclime Australia and is responsible for Acclime Australia’s Listed Services Division. He is also an ASX-experienced director and chair of public and private companies, with expertise in the listed investment, infrastructure, bio-technology and digital sectors. He currently serves as a director on a number of Australian company boards including ASX listed Frontier Digital Ventures (ASX:FDV) and Weebit- Nano (ASX:WBT), as well as foreign controlled entities and private companies. During his executive career, Mark held roles in banking and finance, funds management, investment and infrastructure development businesses, including being the Company Secretary for ASX:100 companies Transurban Group and Australian Foundation Investment Company Limited Meetings of directors The number of meetings of the Company's Board of Directors ('the Board') and of each Board committee held during the year ended 30 June 2023, and the number of meetings attended by each director were: Full Board Nomination and Remuneration Committee Audit and Risk Committee Attended Held Attended Held Attended Held Mark Simari Jane Ryan Geoff Sam Alan Fisher Hugh Burrill Michael Kotsanis 8 11 8 6 3 5 8 11 8 6 3 5 1 1 1 1 1 1 1 1 1 1 1 1 3 5 2 - 2 2 3 5 3 - 2 2 Held: represents the number of meetings held during the time the director held office or was a member of the relevant committee. Principal activities The principal activities of the Company through the course of the year were the supply of products and provision of research and development and other technical services within the pharmaceutical and allied industries. Results The comprehensive loss for the company for the year ended 30 June 2023 after providing for income tax amounted to $6.0 million (30 June 2022: loss of $1.2 million). Financial position The Company’s operating cash outflows for the year was $7.9 million (30 June 2022: $2.9 million inflow) and reported closing cash balance of $4.4 million at 30 June 2023 (30 June 2022: $9.2 million). This cash balance is further supported by an unutilised facility of $5 million with National Australia Bank Ltd, which is next due for renewal on 31 October 2025. These cash reserves and debt facility are available to support the Company’s execution of strategies and projects and to extend production and manufacturing capabilities. On 21 July 2023 the Company also issued 30,769,354 Ordinary shares raising $2.0 million before costs as part of a rights issue to shareholders. On 4 August 2023 the Company issued further 15,984,389 Ordinary shared raising $1.04mil before costs as part of the share placements Tranche 2. 5 IDT Australia Limited Directors' report 30 June 2023 Review of operations IDT Australia recorded growth across its three key business verticals in the financial year 2023 (FY23), namely the manufacture of Active Pharmaceutical Ingredients (API), Specialty Orals and Advanced Therapies, with the number of commercial contracts reaching a two-year high. This success followed the implementation of the Company’s strategic pivot to focus on the integration of end-to-end pharmaceutical manufacturing. While total revenue was down 42% in FY23 compared to the previous corresponding period (pcp) to $7 million and net loss after tax increased to $8.5 million (FY22 loss of $1.2 million), the previous year’s result was significantly bolstered by government COVID-19 related payments that were worth circa $6 million. In fact, such government payments and assistance were even higher in FY21 at circa $12 million. Additionally, increased investments relating to IDT Australia’s strategic pivot to return the Company to growth, such as the expansion of its sales and marketing team, weighed on the bottom line in FY23. Importantly, these investments have already started producing results. The full-year revenue from IDT Australia’s three key business verticals have collectively increased by 24.8% over the pcp to $6.4 million, with the Company demonstrating quarter-on-quarter growth throughout the 2023 fiscal year along with a strong pipeline of potential sales leads, which sets the Company up for further success in the current financial year. Additional details on its key verticals are outlined below. Specialty Orals Specialty Orals is the largest contributor to Group revenue in FY23. Revenue from this this vertical increased 13.0% over the pcp to $4.6 million, with the growth reflecting how well positioned the business is to capitalise on two large and growing opportunities – Medicinal Cannabis and Psychedelic Therapies. Medicinal Cannabis Our medicinal cannabis manufacturing volumes continued to expand and has added significant growth to the Specialty Orals vertical. IDT Australia has identified future expansion opportunities and increased line capacity within our manufacturing facilities. Further, the Company has developed internal medicinal cannabis assets and looks to extract value from these assets and the knowhow we have built. The new TGA regulation of the industry from 1 July 2023 to ensure sustainable growth for the sector will also benefit IDT Australia as we stand prepared to actively support the industry with Good Manufacturing Practice (GMP) manufacturing. Psychedelic Therapies IDT Australia welcomes the inclusion of psychedelics to Australia’s Special Access Scheme (SAS) program. The Company has developed synthetic process to manufacture both psilocybin and MDMA and continues to build supply opportunities as it continues to seek domestic and international collaborators. IDT Australia holds relevant licences and has qualified manufacturing facilities ready with capacity. We see future growth to the business through GMP manufacture of psychedelics. We have played a significant role in providing compounding development and GMP manufacturing for an efficacy trial in treatment-resistant depression. API Manufacturing This is IDT Australia’s most established vertical, which is currently undergoing a revival following years of underperformance. Revenue from API improved 48.3% over the pcp to $1.7 million as this vertical is complementary to Speciality Orals and Advanced Therapies. This integration increases its strategic value when compared to API being a standalone business, as it was in the past. Drug developers who are looking for a contract manufacturer for their high value treatments are increasingly favouring to partner companies like IDT Australia who can offer a more complete end-to-end solution. Advanced Therapies IDT Australia completed a sterile license extension in April 2023 to include clinical trial manufacture and release. This is a significant step in our journey to establish the Company as a leading manufacturer of advanced therapies and has allowed us to progress to small volume clinical trials through to blinding and labelling. This business vertical recorded revenue of over $200K in FY23 as we continue to receive interest in our sterile manufacturing and to collaborate with research groups within the advanced therapies space to assist in drug translation of medicine opportunities to biotech and large pharmaceutical development programs. 6 IDT Australia Limited Directors' report 30 June 2023 We have several project proposals for sterile injectable product development and GMP manufacturing for clinical trials. IDT Australia estimates revenue will continue to grow until we reach capacity within the advanced therapies/sterile facility. Continuous Improvement IDT Australia remains mindful of the increased headwinds of costs coming from services, suppliers, distributions, and investment into staff. We are committed to improving operations onboarding digital systems to expedite release of manufactured product compliantly. IDT Australia completed the implementation of a digital quality management system (eQMS) to enhance the quality of operations and improve efficiency. IDT Australia will continue to evaluate options to improve performance and drive down operating costs. Material Business Risks to Strategy and Financial Performance in Future Periods The Company has identified a number of material risks that may affect the success of the business over the coming periods, including some that are not directly within its control. The Company’s risk management approach involves the ongoing assessment, monitoring and reporting of risks that could impede the Company’s progress in delivering its strategic priorities. These risks are outlined below, although it is important to note that as IDT Australia’s business continues to grow and evolve, these risks and the Company’s risk profile may change. Customer acquisition and retention Continued growth in revenue and profitability of the Company depends on a number of factors, including its ability to attract new customers on a sufficiently profitable basis, and retaining and increasing revenue from existing customers. Revenue growth is particularly dependent on the Company’s reputation and ability to offer specialised expertise and manufacturing capabilities, on top of the provision of consistently high-quality customer service. Regulatory changes and compliance risks IDT Australia operates in a highly regulated industry. The laws and regulations that govern the development, manufacture, distribution and sale of medicines are subject to constant review by governments and responsible authorities. Any change to the rules for the industry may have a positive or negative effect on the Company. Additionally, IDT Australia is subject to ongoing regulatory audits to maintain its GMP certification. Should the Company fail to pass any of these audits, it may lose its certification, which will have a material negative impact on its business. Competition The industry that IDT Australia operates in is subject to competitive pressures, both domestically and internationally. These competitors may have different cost structures and capabilities, which may provide them a competitive advantage over IDT Australia. Further, some of IDT Australia’s offshore competitors may not be subject to the same rules and regulations that the Company is required to operate under. Depending on the circumstances, this may put IDT Australia at a significant disadvantage or advantage. Other competitive risks faced by the Company include price competition, competitor marketing campaigns, and mergers or acquisitions by competitors and possible new entrants to the Company’s industry. The risks may have a negative impact on IDT Australia’s growth and financial performance. Changes in technology The Company operates in an industry in which technology evolves rapidly with medical advances. This means treatment preferences and trends are also constantly changing, and this could impact on customer demands for IDT Australia’s offerings. To maintain its growth, the Company has to ensure it remains at the cutting edge of drug manufacturing technologies and its ability to do so may be constrained by factors including its available capacity, resources and capital to invest in innovation and design. This may adversely impact on the Company’s financial performance. Cyber security risks IDT Australia retains a significant amount of sensitive customer and third-party information. These parties have high expectations regarding the protection of their information. Additionally, the legal and regulatory environment surrounding information security and privacy is increasingly complex and demanding. Failures or breaches of data protection systems can result in reputational damage, regulatory impositions and financial loss, including claims for compensation by customers or penalties by telecommunications regulators or other authorities. While IDT Australia exercises due care in protecting customer data, it is possible that these measures will not be enough to prevent unauthorised access to its systems and technologies. 7 IDT Australia Limited Directors' report 30 June 2023 Loss of key personnel The Company’s ability to be productive, profitable and competitive, and to implement its growth strategy, depends on the continued employment and performance of senior executives and management. IDT Australia’s performance also depends on its ability to attract and retain skilled workers with the relevant industry and technical experience. The loss of a number of key personnel or the inability to attract additional personnel may have an adverse impact on its financial and operating performance. Access to capital and debt IDT Australia’s ability to fund future growth and profitability may be affected by its ability to access funding from equity investors, credit markets and other financial institutions. This access is dependent on several factors, such as the Company’s financial performance, but may also include factors that are outside its control, such as general economic and financial conditions. There is a risk that the Company may be unable to access debt or equity funding when required on favourable terms, or at all. Dividends There were no dividends paid, recommended or declared during the current or previous financial year. Company performance The table below sets out summary information about the Company’s earnings and movements in shareholder wealth for the five years ended 30 June 2023. Revenue Net profit / (loss) before tax (1) Net profit / (loss) after tax Share price at start of year Share price at end of year Final dividend Basic earnings per share Diluted earnings per share # Shares on issue, 30 June Market capitalisation, 30 June 2023 $000 2022 $000 2021 $000 2020 $000 2019 $000 7,032 (9,776) (8,498) $0.12 $0.07 - (3.5c) (3.5c) 304,583,39 7 $19.80m 12,130 (1,876) (1,160) $0.33 $0.12 - (0.5c) (0.5c) 241,021,79 7 $27.72m 15,989 966 2,103 $0.17 $0.33 - 0.9c 0.9c 239,860,17 0 $77.95m 14,169 (1,919) (1,919) $0.17 $0.17 - (0.8c) (0.8c) 239,313,03 2 $39.49m 12,130 (6,083) (6,083) $0.10 $0.17 - (2.5c) (2.5c) 236,359,10 3 $39.00m Likely developments and expected results of operations Information on likely developments in the operations of the Company and the expected results of operations have not been included in this report because the directors believe it would be likely to result in unreasonable prejudice to the Company. Environmental regulation The Company is not subject to any significant environmental regulation under Australian Commonwealth or State law. Proceedings on behalf of the Company No person has applied to the Court under section 237 of the Corporations Act 2001 for leave to bring proceedings on behalf of the Company, or to intervene in any proceedings to which the Company is a party for the purpose of taking responsibility on behalf of the Company for all or part of those proceedings. Indemnity and insurance of officers The Company has indemnified the directors and executives of the Company for costs incurred, in their capacity as a director or executive, for which they may be held personally liable, except where there is a lack of good faith. During the financial year, the Company paid a premium in respect of a contract to insure the directors and executives of the Company against a liability to the extent permitted by the Corporations Act 2001. The contract of insurance prohibits disclosure of the nature of the liability and the amount of the premium. Indemnity and insurance of auditor The Company has not, during or since the end of the financial year, indemnified or agreed to indemnify the auditor of the Company or any related entity against a liability incurred by the auditor. 8 IDT Australia Limited Directors' report 30 June 2023 During the financial year, the Company has not paid a premium in respect of a contract to insure the auditor of the Company or any related entity. Non-audit services Details of the amounts paid or payable to the auditor for non-audit services provided during the financial year by the auditor are outlined in note 27 to the financial statements. The directors are satisfied that the provision of non-audit services during the financial year, by the auditor (or by another person or firm on the auditor's behalf), is compatible with the general standard of independence for auditors imposed by the Corporations Act 2001. The directors are of the opinion that the services as disclosed in note 27 to the financial statements do not compromise the external auditor's independence requirements of the Corporations Act 2001 for the following reasons: ● all non-audit services have been reviewed and approved to ensure that they do not impact the integrity and objectivity of the auditor; and none of the services undermine the general principles relating to auditor independence as set out in APES 110 Code of Ethics for Professional Accountants issued by the Accounting Professional and Ethical Standards Board, including reviewing or auditing the auditor's own work, acting in a management or decision-making capacity for the Company, acting as advocate for the Company or jointly sharing economic risks and rewards. ● Auditor Grant Thornton Audit Pty Ltd continues in office in accordance with section 327 of the Corporations Act 2001. Auditor's independence declaration A copy of the auditor's independence declaration as required under section 307C of the Corporations Act 2001 is set out immediately after this directors' report. Rounding of amounts The Company is a company of the kind referred to in ASIC Corporations (Rounding in Financials / Directors’ Reports) Instrument 2016/191, dated 24 March 2016, and accordingly the amounts in the Directors’ Report and the Half Year Financial Report are rounded off to the nearest thousand dollars, unless otherwise indicated. Matters subsequent to the end of the financial year On 21 July 2023 the Company issued 30,769,354 Ordinary shares raising $2.0 million before costs as part of a rights issue to shareholders. On 26 July 2023 the National Australia Bank (NAB) loan facility was increased from $2.5mil to $5.0mil and the term of the facility was extended to 31 October 2025. On 1 August 2023, at the Extraordinary General Meeting of the shareholders, the following director options were approved by the shareholders: Mark Simari 6,000,000 shares, Jane Ryan 3,000,000 shares and Geoff Sam 3,000,000 shares. On 4 August 2023 the Company issued further 15,984,389 Ordinary shared raising $1.04mil before costs as part of the share placements Tranche 2. No other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Company's operations, the results of those operations, or the Company's state of affairs in future financial years. Remuneration report (audited) The remuneration report details the key management personnel remuneration arrangements for the Company, in accordance with the requirements of the Corporations Act 2001 and its Regulations. Key management personnel are those persons having authority and responsibility for planning, directing and controlling the activities of the entity, directly or indirectly, including all directors. The remuneration report is set out under the following main headings: ● ● ● Principles used to determine the nature and amount of remuneration Details of remuneration Additional disclosures relating to key management personnel 9 IDT Australia Limited Directors' report 30 June 2023 Principles used to determine the nature and amount of remuneration The objective of the Company's executive reward framework is to ensure reward for performance is competitive and appropriate for the results delivered. The framework aligns executive reward with the achievement of strategic objectives and the creation of value for shareholders, and it is considered to conform to the market best practice for the delivery of reward. The Board of Directors ('the Board') ensures that executive reward satisfies the following key criteria for good reward governance practices: ● ● ● ● competitiveness and reasonableness acceptability to shareholders performance linkage / alignment of executive compensation transparency The Nomination and Remuneration Committee is responsible for determining and reviewing remuneration arrangements for its directors and executives. The performance of the Company depends on the quality of its directors and executives. The remuneration philosophy is to attract, motivate and retain high performance and high quality personnel. The Nomination and Remuneration Committee has engaged an external remuneration consultant to structure an executive remuneration framework from FY2024 onwards. The Company used HaRe group in relation to this remuneration recommendation services. HaRe Group was paid $19,900 during the financial year. The reward framework is designed to align executive reward to shareholders' interests. The Board have considered that it should seek to enhance shareholders' interests by: ● ● having economic profit as a core component of plan design focusing on sustained growth in shareholder wealth, consisting of dividends and growth in share price, and delivering constant or increasing return on assets as well as focusing the executive on key non-financial drivers of value attracting and retaining high calibre executives ● Additionally, the reward framework should seek to enhance executives' interests by: ● ● ● rewarding capability and experience reflecting competitive reward for contribution to growth in shareholder wealth providing a clear structure for earning rewards In accordance with best practice corporate governance, the structure of non-executive director and executive director remuneration is separate. Non-executive directors' remuneration IDT has a small and focussed Board which works closely with Executive management. Fees and payments to Directors reflect the demands made on, and the responsibilities of, the Directors. Directors’ fees are reviewed annually by the Remuneration and Nomination Committee, considering comparative remuneration data for the industry and size of the Company to attract Directors with relevant expertise in our industry as well as Australian capital markets. The Non-Executive Directors’ annual base fee is currently $70,000 and the Chair $120,000, inclusive of superannuation contributions, as required under the Australian superannuation guarantee legislation. Total Non-Executive Directors’ fees are determined within an aggregate Directors’ fee pool limit, periodically referred for approval by shareholders. The current maximum aggregate Directors’ fee pool for Non-Executive Directors is $400,000. Executive remuneration The Company aims to reward executives based on their position and responsibility, with a level and mix of remuneration which has both fixed and variable components. The executive remuneration and reward framework has four components: ● ● ● ● base pay and non-monetary benefits short-term performance incentives share-based payments other remuneration such as superannuation and long service leave The combination of these comprises the executive's total remuneration. Fixed remuneration, consisting of base salary, superannuation and non-monetary benefits, are reviewed annually by the Nomination and Remuneration Committee based on individual and business unit performance, the overall performance of the Company and comparable market remunerations. 10 IDT Australia Limited Directors' report 30 June 2023 Executives may receive their fixed remuneration in the form of cash or other fringe benefits (for example motor vehicle benefits) where it does not create any additional costs to the Company and provides additional value to the executive. The short-term incentives ('STI') program is designed to align the targets of the business units with the performance hurdles of executives. STI payments are granted to executives based on specific annual targets and key performance indicators ('KPI's') being achieved. KPI's include profit contribution, customer satisfaction, leadership contribution and product management. The performance targets are set and approved by the Board at the beginning of the year. These targets include meeting set key objectives at the beginning of the year and individual achievement are measured against the target. The long-term incentives ('LTI') include long service leave and share-based payments. Shares are awarded to executives over a period of three years based on long-term incentive measures. These include increase in shareholders value relative to the entire market and the increase compared to the Company's direct competitors. The Nomination and Remuneration Committee reviewed the long-term equity-linked performance incentives specifically for executives during the year ended 30 June 2023. Entity performance and link to remuneration Remuneration for certain individuals is directly linked to the performance of the Company. A portion of cash bonus and incentive payments are dependent on defined earnings per share targets being met. The remaining portion of the cash bonus and incentive payments are at the discretion of the Nomination and Remuneration Committee. Refer to the section Company performance above in the Directors report for details of the earnings and total shareholders return for the last five years. An agreed set of protocols were put in place to ensure that the remuneration recommendations would be free from undue influence from key management personnel. These protocols include requiring that the consultant not communicate with affected key management personnel without a member of the Nomination and Remuneration Committee being present, and that the consultant not provide any information relating to the outcome of the engagement with the affected key management personnel. The Board is also required to make inquiries of the consultant's processes at the conclusion of the engagement to ensure that they are satisfied that any recommendations made have been free from undue influence. The Board is satisfied that these protocols were followed and as such there was no undue influence. Details of remuneration Amounts of remuneration Details of the remuneration of key management personnel of the Company are set out in the following tables. 11 IDT Australia Limited Directors' report 30 June 2023 2023 Non-Executive Directors: M. Simari, Chair1 J Ryan2 G Sam3 A Fisher, Chair4 H Burrill5 M Kotsanis6 Other Key Management Personnel: P McDonald, Chief Executive Officer7 Mr Vasanthakumar, Chief Financial Officer8 P Thiyageas, Quality Director9 J Sosic, Operations Director10 A Nesci, Commercial & Portfolio Director11 D Sparling, Chief Executive Officer12 A Desai, Chief Financial Officer13 C Kagiaros, Head of People and Culture14 Short-term benefits Post- employment benefits Long-term benefits Share- based payments Cash salary Cash Non- Super- Long service and fees $ bonus $ monetary $ annuation $ leave $ Shares granted as compensati on $ Total $ 75,618 63,348 46,254 54,299 17,345 25,915 - - - - - - - - - - - - - 6,652 4,857 5,701 1,821 2,721 - - - - - - - - - - - - 75,618 70,000 51,111 60,000 19,166 28,636 290,636 16,800 15,588 30,622 16,885 93,025 463,556 152,700 155,032 16,667 1,000 1,000 - 18,300 - - 200,000 1,000 473,150 - 104,661 19,200 - - - 16,139 16,383 1,750 21,105 24,773 7,524 2,588 2,846 278 1,000 52,521 - 191,727 227,782 18,695 - - - 60,024 282,129 - - 497,923 131,385 92,534 1,768,159 10,889 49,889 - 33,888 7,881 147,929 - 22,597 - 111,304 206,570 2,229,032 1 Mr Simari was appointed Non-executive director on 10 October 2022 and Chair on 1 January 2023 2 Ms Ryan was appointed Non-executive director on 28 January 2022 3 Mr Sam was appointed Non-executive director on 10 October 2022 4 Mr Fisher was Non-executive Director (Chair) until 31 December 2022 5 Mr Burrill was Non-executive Director until 10 October 2022 6 Mr Kotsanis was Non-executive Director until 28 November 2022 7 Mr McDonald was appointed CEO from Head of Quality on 15 September 2022 8 Mr Vasanthakumar was appointed CFO on 28 September 2022 9 Ms Thiyageas was appointed Quality Director from Operations Manager on 01 November 2022 10 Mr Sosic was appointed Operations Director on 01 June 2023 11 Ms Nesci was appointed Commercial & Portfolio Director from Interim Head of Operations on 01 November 2022 until 16 June 2023 12 Mr Sparling was CEO until 13 September 2022 13 Mrs Desai was CFO until 14 October 2023 14 Mr Kagiaros was Head of People and Culture until 25 November 2022. Short term incentive bonuses were paid on 28 July 2022 for performance in the FY22 financial year. Further a $1,000 cash bonus was paid on 13 December 2022 for Mr McDonald, Mr Vasanthakumar, Ms Thiyages and Ms Nesci as part of a Company wide payment made to all staff at IDT. 12 IDT Australia Limited Directors' report 30 June 2023 2022 Non-Executive Directors: A Fisher, Chair H Burrill M Kotsanis J Ryan1 M Sontrop2 Other Key Management Personnel: D Sparling, Chief Executive Officer A Desai, Chief Financial Officer P McDonald, Head of Quality and Development C Kagiaros, Head of People and Culture3 J Sosic, Vice President Operations, Supply and Infrastructure4 Short-term benefits Post- employment benefits Long-term benefits Share- based payments Cash salary Cash Non- Super- Long service and fees $ bonus $ monetary $ annuation $ leave $ Shares granted as compensati on $ Total $ 109,091 63,636 63,636 27,020 24,215 - - - - - 354,750 240,000 163,325 46,560 - - - - - - - 10,909 6,364 6,364 2,702 2,421 - - - - - - - - - - 120,000 70,000 70,000 29,722 26,636 27,500 25,106 10,526 1,296 104,200 72,000 660,301 384,962 200,000 17,783 23,299 20,000 704 60,000 321,786 175,000 - - 17,500 824 53,600 246,924 149,432 1,406,780 36,080 263,748 1,969 25,268 10,907 129,773 - 13,350 - 198,388 289,800 2,128,719 1 Ms Ryan was appointed Non-executive director on 28 January 2022. 2 Ms Sontrop was Non-executive director until 16 November 2021. 3 Mr Kagiaros was appointed Head of People and Culture on 1 September 2021. 4 Mr Sosic was Vice President Operations, Supply and Infrastructure until 29 November 2021. Short-term incentive bonuses were paid on 17 August 2021 for performance in the FY21 financial year. Summary of the total incentives paid in relation to achievement of objectives established at the beginning of the previous financial year: Name D Sparling2 A Desai2 P McDonald1 C Kagiaros2,3,4 Potential of fixed remuneration Achievement of objectives set at the start of the year 2023 2022 2023 2022 50.00% 20.00% 20.00% 20.00% 50.00% 20.00% 20.00% 20.00% - 40.00% 39.50% 36.50% - 40.00% 39.50% 36.50% 1 Mr McDonald was Head of Quality and Development until 14 September 2022 where his potential short term incentive was set at 20%. Upon Mr McDonald's appointment as CEO from 15 September 22, the potential short term incentive was set at 50%. 2 Mr Sparling, Ms Desai and Mr Kagiaros are no longer with the Company. 3 Mr Kagiaros’s bonus was prorated as he was employed by IDT from 1 September 2021 as an ELT Member. 4 Mr Kagiaros’ bonus was prorated because he was appointed in the role for only part of the financial year ended 30 June 2022. 13 IDT Australia Limited Directors' report 30 June 2023 Additional disclosures relating to key management personnel Shareholding The number of shares in the Company held during the financial year by each director and other members of key management personnel of the Company, including their personally related parties, are set out below: 2023 Ordinary shares Non-executive Directors M Kotsanis1 M Simari J Ryan G Sam A Fisher1 H Burrill1 Other key management personnel P McDonald M Vasanthakumar P Thiyageas A Nesci1 D Sparling1 A Desai1 C Kagiaros1 Balance at the start of the year Shares issued to employees Other changes during the year Disposals/ other Balance at the end of the year - 115,000 - - - - - - - 865,106 - - - 2,031,000 690,000 418,000 4,119,106 - - - - - - - - - 1,525,000 - 861,000 984,000 - - - 3,370,000 - - 355,206 79,366 355,206 - - - - - 13,157 - - - - - 1,495,244 - (115,000) - - - - - - - - - - (984,000) (2,031,000) (690,000) (418,000) (4,238,000) - - 355,206 79,366 355,206 - - - - 2,390,106 13,157 861,000 - - - - 4,746,350 1 Mr Kotsanis, Mr Fisher, Mr Burrill, Ms Neci, Mr Sparling, Ms Desai and Mr Kagiaros were not in office at the end of the financial year and accordingly their shareholdings as at 30 June 2023 are not disclosed. 2023 Tranche Grant Date Share price per agreement ($) Issue price ($) Share price ($) Number of loan backed shares Expected repayment date Fair value of one share based payment ($) Fair Value ($) 09/03/2023 P McDonald A Nesci 09/03/2023 P Thiyageas 09/03/2023 $0.061 $0.061 $0.061 $0.061 $0.061 $0.061 $0.061 1,525,000 09/03/2028 984,000 09/03/2028 $0.061 861,000 09/03/2028 $0.061 0.0375 57,187.50 0.0375 36,900.00 0.0375 32,287.50 2022 Ordinary Shares Non-executive Directors M Kotsanis M Sontrop 1 Other key management personnel D Sparling A Desai P McDonald C Kagiaros J Sosic 1 Balance at the start of the year Shares issued to employees Other changes during the year Disposals/ other Balance at the end of the year - 115,000 275,000 - 2,936,621 490,000 483,125 150,000 1,546,292 5,996,038 - - - - 521,000 360,000 300,000 268,000 - 1,449,000 - - - - (1,426,621) (160,000) 81,981 - - (1,504,640) - - (275,000) - - - - - (1,546,292) (1,821,292) - 115,000 - - 2,031,000 690,000 865,106 418,000 - 4,119,106 14 IDT Australia Limited Directors' report 30 June 2023 1 Ms Sontrop and Mr Sosic were both not in office at the end of the financial year and accordingly their shareholdings as at 30 June 2022 are not disclosed. 2022 Tranche Grant date Share price per agreement ($) Issue price ($) Share price ($) Number of loan backed shares Expected repayment date Fair value of one share based payment ($) Fair Value ($) D Sparling A Desai P McDonald C Kagiaros 03/03/2022 03/03/2022 03/03/2022 03/03/2022 $0.200 $0.200 $0.200 $0.200 $0.200 $0.200 $0.200 $0.200 $0.200 $0.200 $0.200 $0.200 521,000 03/03/2027 360,000 03/03/2027 300,000 03/03/2027 268,000 03/03/2027 0.1305 67,990.50 0.1305 46,980.00 0.1305 39,150.00 0.1305 34,974.00 1,449,000 0.5220 189,094.50 This concludes the remuneration report, which has been audited. This report is made in accordance with a resolution of directors, pursuant to section 298(2)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ Mark Simari Chair 28 August 2023 15 Grant Thornton Audit Pty Ltd Level 22 Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 Auditor’s Independence Declaration To the Directors of IDT Australia Limited In accordance with the requirements of section 307C of the Corporations Act 2001, as lead auditor for the audit of IDT Australia Limited for the year ended 30 June 2023, I declare that, to the best of my knowledge and belief, there have been: a b no contraventions of the auditor independence requirements of the Corporations Act 2001 in relation to the audit; and no contraventions of any applicable code of professional conduct in relation to the audit. Grant Thornton Audit Pty Ltd Chartered Accountants M A Cunningham Partner – Audit & Assurance Melbourne, 28 August 2023 www.grantthornton.com.au ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. 16 #10104015v1w IDT Australia Limited Statement of profit or loss and other comprehensive income For the year ended 30 June 2023 Revenue Sales revenue Other income Total revenue Expenses Raw materials and consumables used Employee benefits expense Depreciation and amortisation expense Professional fees Utilities and Maintenance expenses Other expenses Total expenses Loss before income tax benefit Income tax benefit Loss after income tax benefit for the year attributable to the owners of IDT Australia Limited Other comprehensive income Items that may be reclassified subsequently to profit or loss Property revaluation net of tax Other comprehensive income for the year, net of tax Total comprehensive income for the year attributable to the owners of IDT Australia Limited Basic earnings per share Diluted earnings per share Note 2023 $000 2022 $000 5 6,935 97 7,032 12,105 25 12,130 (2,181) (7,248) (1,039) (596) (3,210) (2,534) (16,808) (1,440) (6,308) (1,536) (372) (3,323) (1,027) (14,006) (9,776) (1,876) 1,278 716 (8,498) (1,160) 2,457 2,457 - - 7 22 (6,041) (1,160) Cents Cents 8 8 (3.48) (3.48) (0.48) (0.48) The above statement of profit or loss and other comprehensive income should be read in conjunction with the accompanying notes 17 IDT Australia Limited Statement of financial position As at 30 June 2023 Assets Current assets Cash and cash equivalents Trade and other receivables Contract assets Inventories Current tax assets Total current assets Non-current assets Property, plant and equipment Intangibles Total non-current assets Total assets Liabilities Current liabilities Trade and other payables Contract liabilities Borrowings Employee benefits Total current liabilities Non-current liabilities Employee benefits Total non-current liabilities Total liabilities Net assets Equity Issued capital Reserves Accumulated losses Total equity Note 30 June 2023 $000 Restated 30 June 2022 $000 Restated 1 July 2021 $000 9 10 11 12 13 15 17 16 18 18 4,433 3,333 190 1,372 415 9,743 9,214 2,784 49 1,102 716 13,865 6,928 9,357 - 528 453 17,266 18,546 - 18,546 16,215 - 16,215 16743 120 16,863 28,289 30,080 34,129 1,867 829 740 546 3,982 1,253 517 881 490 3,141 4,413 766 617 636 6,432 166 166 314 314 445 445 4,148 3,455 6,877 24,141 26,625 27,252 19 21 22 54,929 10,773 (41,561) 51,189 8,499 (33,063) 51,189 7,966 (31,903) 24,141 26,625 27,252 The Company has made a retrospective restatement as a consequence of an error in accordance with AASB 108 and therefore in line with AASB101 has restated the comparative figures as set out in Note 1. The above statement of financial position should be read in conjunction with the accompanying notes 18 IDT Australia Limited Statement of changes in equity For the year ended 30 June 2023 Contributed Equity $000 Asset Revaluation Reserve $000 Share based Payment Reserve $000 Accumulated Losses $000 Total equity $000 Balance at 1 July 2021 51,189 3,897 4,069 (31,540) 27,615 Adjustment for correction of error - - - (363) (363) Balance at 1 July 2021 - restated 51,189 3,897 4,069 (31,903) 27,252 Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Share based payments expense Proceeds repayment limited recourse loans - - - - - - - - - - - - - (1,160) (1,160) - - (1,160) (1,160) 218 315 - - 218 315 Balance at 30 June 2022 Restated 51,189 3,897 4,602 (33,063) 26,625 Contributed Equity $000 Asset Revaluation Reserve $000 Share based Payment Reserve $000 Accumulated Losses $000 Total equity $000 Balance at 1 July 2022 51,189 3,897 4,602 (33,063) 26,625 Loss after income tax benefit for the year Other comprehensive income for the year, net of tax Total comprehensive income for the year Transactions with owners in their capacity as owners: Equity Capital raised Share based payment expense Cancellation of loan funded shares Costs of raising Capital - - - - 2,457 2,457 - - - (8,498) (8,498) - 2,457 (8,498) (6,041) 3,784 - - (44) - - - - - 363 (546) - - - - - 3,784 363 (546) (44) Balance at 30 June 2023 54,929 6,354 4,419 (41,561) 24,141 The above statement of changes in equity should be read in conjunction with the accompanying notes 19 IDT Australia Limited Statement of cash flows For the year ended 30 June 2023 Cash flows from operating activities Receipts from customers (inclusive of GST) Payments to suppliers and employees (inclusive of GST) Interest and other costs of finance received / (paid) Income tax refund received Note 2023 $000 2022 $000 6,917 (15,626) 91 716 16,544 (14,189) (22) 528 Net cash (used in)/from operating activities 23 (7,902) 2,861 Cash flows from investing activities Payments for property, plant and equipment Net cash used in investing activities Cash flows from financing activities Proceeds from issue of equity Proceeds from borrowings Repayment of borrowings Net cash from financing activities Net (decrease)/increase in cash and cash equivalents Cash and cash equivalents at the beginning of the financial year 19 (522) (522) (912) (912) 3,784 1,234 (1,375) 315 1,354 (1,332) 3,643 337 (4,781) 9,214 2,286 6,928 Cash and cash equivalents at the end of the financial year 9 4,433 9,214 The above statement of cash flows should be read in conjunction with the accompanying notes 20 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 1. Significant accounting policies The principal accounting policies adopted in the preparation of the financial statements are set out below. These policies have been consistently applied to all the years presented, unless otherwise stated. 1.1 Statement of Compliance These financial statements are general purpose financial statements prepared in accordance with the Corporations Act 2001, Australian Accounting Standards and Interpretations, and comply with International Financial Reporting Standards and other requirements of the law. For the purposes of preparing the financial statements, the Company is a for-profit entity. 1.2 Basis of Preparation These financial statements have been prepared under the basis of historical cost, except for certain financial instruments, intangible assets and land and buildings that are measured at fair value. Historical cost is generally based on fair values of the consideration given in exchange for goods and services, being the price that would be received in an orderly transaction at the measurement date, regardless of whether that price is directly observable or estimated using another technique. A fair value measurement of a non-financial asset considers the Company’s ability to generate economic benefits through use of the asset in its highest or best use or by selling it through an orderly transaction. In estimating the fair value of an asset or liability, the Company considers the characteristics market participants would take into account when pricing the asset or liability at measurement date. Fair value has been used in these financial statements except for transactions within the scope of AASB 2 Share Based Payments, AASB 16 Leases and measurements that have some similarities to fair value but are not fair value, such as net realisable value in AASB 102 Inventories or fair value less cost to dispose in AASB 136 Impairment of Assets. For financial reporting purposes fair value measurements are categorised into Level 1, 2 or 3 based on the degree to which the inputs to the fair value measurements are observable and the significance of the inputs to the fair value measurement in its entirety, described as follows: ● ● ● Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that the entity can access at the measurement date; Level 2 inputs are inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly or indirectly; and Level 3 inputs are unobservable inputs for the asset or liability. All amounts are presented in Australian dollars unless otherwise noted. 1.3 Impairment of Non-Current Assets For all except goodwill and indefinite life intangibles, non-financial assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount. Recoverable amount is the higher of an asset’s fair value less costs of disposal and value-in-use. The value-in-use is the based on the market capitalisation of the company. 1.4 New or amended Accounting Standards and Interpretations adopted The Company has adopted all of the new or amended Accounting Standards and Interpretations issued by the Australian Accounting Standards Boards (‘AASB’) that are mandatory for the current reporting period. Any new or amended Accounting Standards or Interpretations that are not mandatory have not yet been adopted. 1.5 Foreign Currency Translation Transactions in currencies other than the Company’s functional currency are recognised at the rates of exchange prevailing at the date of the transaction. At the end of each reporting period, monetary items denominated in foreign currencies are translated at the rates prevailing at that date. 21 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 1. Significant accounting policies (continued) Foreign exchange gains and losses resulting from settlement of such transactions and translation at period end exchange rates of foreign currency monetary assets and liabilities are recognised in the Statement of Profit or Loss and Other Comprehensive Income. 1.6 Rounding of Amounts The Company is of a kind referred to in ASIC Corporations (Rounding in Financial/Directors’ Reports) Instrument 2016/191, dated 24 March 2016, issued by the Australian Securities and Investments Commission, relating to the "rounding off" of amounts in the financial statements. Amounts in the financial statements have been rounded off in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar. 1.7 Reclassification of Contract Assets The Company classifies billable work-in-progress not yet invoiced as Contract Assets. The amount at 30 June 2023 is $190,284 (2022: $49,383) and has been restated from Inventory to Contract Assets in the Statement of Financial Position. This does not impact on the Profit or Cash flows. 1.8 Revenue recognition Accounting policy for revenue from contracts with customers Revenue arises mainly from development and manufacturing of Active Pharmaceutical Ingredients (API) and Finished Dose Forms (FDF). To determine whether to recognise revenue, the Company follows a 5-step process: (1) Identifying the contract with a customer (2) Identifying the performance obligations (3) Determining the transaction price (4) Allocating the transaction price to the performance obligations (5) Recognising revenue when/as performance obligations are satisfied. Revenue is recognised either at a point in time or over time, when the Company satisfies performance obligations by transferring the promised goods or services to its customers. The Company recognises contract liabilities for consideration received in respect to unsatisfied performance obligations and reports these amounts as other liabilities in the statement of financial position. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognises either a contract asset or a receivable in its statement of financial position, depending on whether something other than the passage of time is required before the consideration is due. The Company has two key types of arrangements with Clients; 1) Fee for Service Revenue generated in accordance with a Scope of Works agreed with clients before project commencement and recognised over the term of the project as specific performance obligations are completed (i.e. over time), 2) Manufacturing activities, particularly manufacture of Active Pharmaceutical Ingredients, conducted based on supply agreements and purchase orders received from clients. Revenue from these activities is recognised after product has been released by Quality Assurance and shipped in accordance with client instructions (i.e. point in time). It must also be probable that the economic benefits of the transaction will flow to the Company and the amount of revenue can be measured reliably. In some instances the Company acts as an agent for the customer and incurs the cost of freight of the goods. The freight charges are on-charged to the customer and this revenue is recognised when the transfer of goods occurs. 1.9 Income tax The income tax expense or benefit for the period is the tax payable / receivable on the current period’s taxable income / (loss) based on the notional income tax rate adjusted by changes in deferred tax assets and liabilities attributable to temporary differences between the tax bases of assets and liabilities and their carrying amounts in the financial statements, and unused tax losses. Current and deferred tax balances attributable to amounts recognised directly in equity are also recognised directly in equity. The Company incurs eligible expenditure which supports a R&D Tax Incentive Claim, refundable by the Australian Government at 43.5% for entities with a tax loss and revenues less than $20 million. There are no unfulfilled conditions or other contingencies in relation to this incentive. This receivable balance is accounted for as a current tax asset and income tax expense / (benefit). 22 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 1. Significant accounting policies (continued) 1.10 Cash at bank and on hand For purposes of the statement of cash flows, cash and cash equivalents include bank deposits which are readily convertible to cash on hand and which are used in the cash management function on a day-to-day basis. 1.11 Total trade and other receivables Trade receivables represent amounts receivable relating to the provision of goods and services pursuant to a valid purchase order or contract for product or services. Receivables are recognised at the full value receivable and do not require re- measurement because they are due for settlement within 60 days of invoice date. The Company has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. 1.12 Current Tax Assets The Company incurs eligible expenditure to support a R&D Tax Incentive Claim. The estimated amount of claim is recognised as a current tax asset and income tax expense / (benefit) in the year that the R&D was incurred. 1.13 Inventories Inventories are valued at the lower of cost and net realisable value with the cost determined on a first-in-first-out basis. Net realisable value reflects the estimated selling price in the ordinary course of business less the estimated costs of completion and costs necessary to make the sale. Subsequent to initial measurement, balances held in inventory are reviewed at least annually and a provision raised where future use is no longer considered probable, principally due to reasons of obsolescence or product dating. 1.14 Property, Plant and Equipment Freehold land and buildings are shown at revalued amounts being the fair value (level 3) at date of revaluation less subsequent depreciation for buildings. The most recent fair value measurement by independent valuers was 31 December 2022. The valuation conforms to Australian Valuation Standards and was calculated based on the fair value of the land and depreciated replacement cost of the buildings. As revaluations are performed regularly, carrying amounts do not differ materially from those that would be determined using fair values at the end of each reporting period. The revaluation increase arising on the revaluation of land and buildings is accumulated in the revaluation reserve within equity. Decreases that offset previous increases of the same asset are recognised against revaluation reserve directly in equity; all other decreases are to be recognised in profit or loss. Plant and equipment, including Right of Use Assets, are measured at cost less accumulated depreciation and any impairment adjustments which may have been identified. The cost of non-current assets constructed or developed by the Company includes the costs of all materials used in construction, direct labour on the project and an appropriate proportion of directly attributable variable and fixed overheads. AASB 16 Leases provides the lessee with the choice of whether to recognise short-term or low value leases on the balance sheet. Under the Company’s policy, photocopiers and printers are treated as short term or low value leases, which qualify for the low value lease exemption. Depreciation is recognised so as to write off the cost or valuation of assets, other than land, over their estimated useful lives, net of their residual values, using the straight-line method, as follows: - Buildings - Plant & Equipment 40 years 3-15 years Estimated useful lives, residual values and depreciation methods are reviewed at the end of each reporting period, with the effect of any changes in estimate accounted for on a prospective basis. Plant is regularly overhauled through an ongoing cyclical maintenance program. Routine operating maintenance, repair costs and minor renewals are charged as expenses as incurred. 23 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 1. Significant accounting policies (continued) An item of property, plant and equipment is derecognised upon disposal or where no future economic benefits are expected to arise from continued use. Any gain or loss arising on disposal or retirement is determined as the difference between the sales proceeds and the carrying amount of the asset and is recognised in the profit or loss. 1.15 Intangible Assets a) Internally generated Intangible Assets Research expenditure is recognised as an expense as incurred. An internally generated intangible asset arising from development is recognised as a non-current asset where all of the following conditions can be demonstrated: ● ● ● ● ● technical feasibility of completing the project that it will be available for use or sale; intention to complete the intangible asset and use it or sell it; the intangible asset will generate probable future economic benefits for the Company; availability of adequate technical, financial and other resources to complete the development; and the ability to measure reliably the expenditure attributable to the development of the asset. The amount initially recognised for internally generated intangible assets is the sum of the expenditure incurred from the date the asset first met the recognition criteria listed above. Development expenditures that do not meet all of these criteria are recognised in profit or loss in the period in which incurred. Development costs previously recognised as an expense may not be recognised as an asset in a subsequent period. Subsequent to initial recognition, internally generated intangible assets are reported at cost less accumulated amortisation from the date the intangible asset first meets the recognition criteria. The estimated useful life and amortisation method are reviewed at the end of each reporting period, with the effect of any change accounted for on a prospective basis. b) Impairment of intangible assets Assets with finite lives are subject to amortisation and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment or more frequently if events or changes in circumstances indicate that they may be impaired. An impairment loss is recognised in the statement of comprehensive income for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. For the purpose of assessing impairment, assets are grouped at the lowest levels for which there are separately identifiable cash flows (cash generating units), other than goodwill that is monitored at the segment level. Impairment losses recognised in respect of cash generating units are allocated first to reduce the carrying amount of any goodwill allocated to cash generating units, and then to reduce the carrying amount of the other assets in the unit on a pro-rata basis. 1.16 Deferred Tax Assets and Liabilities Deferred tax assets and liabilities are recognised for temporary differences at the tax rates expected to apply when the assets are recovered or liabilities settled. The relevant tax rate is applied to the cumulative amounts of deductible and taxable temporary differences to measure the deferred tax asset or liability. An exception is made for certain temporary differences arising from the initial recognition of an asset or a liability. No deferred tax asset or liability is recognised in relation to temporary differences if they arose in a transaction, other than a business combination, that at the time of the transaction did not affect either accounting profit or taxable profit or loss. Deferred tax assets will only be recognised for deductible temporary differences and unused tax losses if it is probable that future taxable amounts will be available to utilise those temporary differences and losses. In addition to the above deferred tax assets recognised, the Company has further unrecognised tax losses relating to prior period tax losses. 1.17 Contract liabilities Fee for Service Revenue generated in accordance with a Scope of Works agreed with clients before project commencement and recognised over the term of the project as specific performance obligations are completed (i.e. over time). In some cases the client may pay for services before the work is conducted and this revenue is deferred until earned. 24 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 1. Significant accounting policies (continued) Contractual milestones have been received in accordance with the Company’s long-term distribution agreements. As such milestones relate to the performance of the contract, revenue is recognised over the term of the distribution contract. 1.18 Employee Benefits The provision for employee entitlements represents annual leave, vested long service leave and an estimate of the future value of long service leave which has not yet vested but is expected to be payable to employees. A liability is recognised for benefits accruing to employees in respect of wages and salaries, annual leave and long service leave when it is probable that settlement will be required and they can be reliably measured. Liabilities recognised in respect of short term employee benefits are classified as current liabilities and measured at their nominal values using the remuneration rate expected to apply at the time of settlement. Liabilities recognised in respect of long-term employee benefits are classified as non-current liabilities and measured at the present value of the estimated future outflows to be made by the Company in respect of services provided by employees up to reporting date. 1.19 Share-based Payments Directors, Executive Management and selected staff may be offered shares in the Company at the current market value at the date of issue, funded by an interest free limited recourse loan from the Company. These limited recourse loan funded shares are measured and accounted for as options in accordance with the substance, and no asset is recognise for the loan. Grants within the framework of the Employee Share Plan (ESP) are determined by the CEO together with the Remuneration and Nomination Committee and are subject to approval by the Board. Amounts disclosed for emoluments relating to these shares are the assessed fair values at issue date determined using the Binomial method taking into account the share price at grant date and expected price volatility of the underlying share, the expected dividend yield and the risk-free interest rate for the term of the arrangement. The ESP provides an annual value of up to $1,000 of shares may be issued to eligible employees for no consideration. The value of shares issued is recognised in the income statement as employee benefit costs at the time the shares are granted. Such shares may not be sold until the earlier of three years after issue or cessation of employment with the Company. In all other respects ESP shares rank equally with other fully-paid ordinary shares on issue. 1.20 Earnings Per Share (i) Basic Earnings per Share - Basic earnings per share is determined by dividing the profit or loss attributable to equity holders of the Company, excluding any costs of servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial year. (ii) Diluted Earnings per Share - Diluted earnings per share adjusts the figures used in the determination of basic earnings per share to take into account the after income tax effect of interest and other financing costs associated with dilutive potential ordinary shares and the weighted average number of shares assumed to have been issued for no consideration in relation to dilutive potential ordinary shares. 1.21 Operating Segments Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing performance of the operating segments, has been identified as the Chief Executive Officer of IDT Australia Limited. The Company has identified one reportable segment, that is: Development and Manufacture of Active Pharmaceutical Ingredients (API) and Finished Dose Forms (FDF). The segment details are therefore fully reflected in the body of the financial statements. 1.22 Restatement of Comparative Figures The Company has restated its comparatives for the year ended 30 June 2022 in these statements after identifying revenue which was inappropriately recognised as revenue in the year ended 30 June 2021 and 30 June 2020. Revenue was recognised prior to control of certain inventory items passing to the customer. The error has been corrected by restating each of the affected financial statement line items for the prior periods, as follows: 25 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 1. Significant accounting policies (continued) Balance Sheet (extract) Contract liabilities Accumulated losses 30 June 2022 (Increase)/ decrease 30 June 2022 (restated) 1 July 2021 (restated) $000 $000 $000 $000 (154) (32,700) (363) (363) (517) (33,063) (766) (31,903) Note 2. Critical accounting judgements, estimates and assumptions Preparation of these financial statements requires the Company to make estimates and judgements that may affect the reported values of assets, liabilities, revenues and expenses. Management continually evaluates estimates and judgements based on historical experience and other factors it believes to be reasonable under the circumstances, including expectations of future events that may have a financial impact on the entity. In preparing the financial statements, management has considered the impact of COVID-19 on the various balances, including the carrying values of trade receivables and accounting estimates for which cash flow forecasts are required to be prepared such as the recoverable amount of non-current assets. The following critical judgements have been made in application of the Company's accounting policies and have the most significant effect on amounts recognised in the Company’s financial statements. Valuation of non-current assets (being property, plant and equipment and finite life intangibles assets) The Company applies AASB 136 Impairment of Assets to test the carrying value of non-current assets and impairment. Judgement is applied to make estimates of future cash flows to support assessment of the appropriateness of the carrying value. Criteria considered include anticipated future sales prices, market size and expected share, future exchange rates and the discount rate. In making these judgements, the Company makes reasonable and supportable assumptions to represent management's estimate of the conditions that will exist over the useful life of the asset. Amongst other factors the Company evaluates technical feasibility, the cost to complete the project, existence of an attractive commercial market, potential launch dates and sales expectations to conclude on the value of expected future economic benefits which would be expected to flow to the entity in order to calculate discounted cash flows. Balanced estimates of these criteria have been made but key sensitivities could include more competitive market conditions which could result in higher than expected discounting required to achieve targeted market share. At any time should the estimated value of future economic benefits relative to the asset’s carrying value be considered insufficient relative to net book value, the Company would recognise impairment in accordance with AASB 136 Impairment of Assets. Income taxes Deferred tax assets are recognised for deductible temporary differences and tax losses as management considers that it is probable that future taxable profits will be available to utilise those temporary differences. The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the asset to be recovered. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the Company expects, at the end of the reporting period, to recover or settle the carrying amount of its assets and liabilities. Provision for impairment of inventories The provision for impairment of inventories assessment requires a degree of estimation and judgement. The level of the provision is assessed by taking into account the usage of each item, product expiry date and other factors that affect inventory obsolescence. Share-based payments The issuance of shares to employees are at market rates and funded by interest-free limited recourse loans to the Company. The fair values of such arrangements utilises the Binomial method and therefore includes elements of judgment and estimate in determining certain input factors such as an estimate of share price volatility. 26 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 2. Critical accounting judgements, estimates and assumptions (continued) Timing of revenue recognition Revenue is recognised either at a point in time or over time, when the Company satisfies performance obligations by transferring the promised goods or services to its customers. Note 3. Operating segments The Company has identified one reportable segment, that is: Development and Manufacture of Active Pharmaceutical Ingredients (API) and Finished Dose Forms (FDF). The segment details are therefore fully reflected in the body of the financial statements. Refer to note 1 for further information on the accounting policy. Note 4. Going concern The financial statements have been prepared on a going concern basis, which contemplates continuity of normal business activities and the realisation of assets and discharge of liabilities in the normal course of business. Revenue for the full year ended 30 June 2023 was $7.0 million compared to $12.1 million (inclusive of a $5.8 million government grant) for the full year ended 30 June 2022. The Company incurred an after-tax loss of $8.5 million for the full year ended 30 June 2023, compared to a loss of $1.2 million for the full year ended 30 June 2022. Cash at 30 June 2023 was $4.4 million (30 June 2022 $9.2 million) and net cash outflow for the full year ended 30 June 2023 was $4.8 million, compared to net cash inflow of $2.3 million for the full year ended 30 June 2022. The decrease in cash inflow was primarily driven by a decrease in revenue as resources were invested into non-revenue generating activities such as sterile facility qualifications. The sterile facility qualifications were completed, and the final license was issued by the TGA on 24 March 2023. This license will advance our cash generating activities for the coming year. Currently the Company has work orders, master service agreements, and forecast to fulfill in the coming year. The cash balance as of 30 June 2023 is further supported by an unutilised debt facility of $5.0 million with the National Australia Bank Ltd (‘NAB’) which is due for next renewal on 31 October 2025. A further $2.0 million has been raised in July 2023 through a Share Placement Program. The Directors have considered a cash flow forecast and the projected revenue and are satisfied that the Company will operate as a going concern and continue to meet its financial obligations for the foreseeable future. Based on the cash flow forecast and the above funding arrangements, the Directors are satisfied that the going concern basis of preparation is appropriate. Note 5. Revenue Service revenue recognised over time Sale of goods transferred at a point in time 2023 $000 2022 $000 6,935 - 12,105 - 6,935 12,105 27 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 6. Expenses Profit / (Loss) from ordinary activities before income tax expense includes the following expenses: Cost of goods sold Depreciation of property, plant and equipment Amortisation - Development costs Repairs and maintenance Net foreign currency (loss) / gain Note 7. Income tax benefit Numerical reconciliation of income tax benefit and tax at the statutory rate Loss before income tax benefit Tax at the statutory tax rate of 25% (2022: 26%) Current year tax losses not recognised Current year temporary differences not recognised Partial recognition of historical/current year losses Non-deductible expenses Research and development tax concessions Deferred tax losses not brought to account Income tax benefit The company income tax rate used in 2023 is 25% (2022: 26%). Note 8. Earnings per share 2023 $000 2022 $000 3,192 1,039 - 883 (66) 760 1,416 120 1,385 34 2023 $000 2022 $000 (9,776) (1,876) (2,444) 2,251 (239) (1,040) 194 - - (1,278) (488) - - - 51 (305) 26 (716) 2023 $000 2022 $000 Loss after income tax attributable to the owners of IDT Australia Limited (8,498) (1,160) Weighted average number of ordinary shares used in calculating basic earnings per share 244,056,384 240,822,027 Weighted average number of ordinary shares used in calculating diluted earnings per share 244,056,384 240,822,027 Number Number Basic earnings per share Diluted earnings per share Note 9. Cash and cash equivalents Current assets Cash at bank and on hand 28 Cents Cents (3.48) (3.48) (0.48) (0.48) 2023 $000 2022 $000 4,433 9,214 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 10. Trade and other receivables Current assets Trade receivables Less: Allowance for expected credit losses Other receivables Prepayments 2023 $000 2022 $000 2,472 (224) 2,248 - 1,085 1,459 - 1,459 82 1,243 3,333 2,784 Allowance for expected credit losses The ageing of the receivables and allowance for expected credit losses provided for above are as follows: Age of receivables which are past due: 0-30 days 30-60 days 60-90 days 90+ days 2023 $000 2022 $000 1,677 454 117 - 1,404 55 - - 2,248 1,459 The average collection period for invoices is 30-60 days from invoice date and interest is not charged on overdue balances. Note 11. Inventories Current assets Raw Materials - at cost Finished Goods Less: Provision for stock obsolescence Raw Materials - at cost Balance at 1 July Purchases during the year Inventory recognised as expense during the year Balance at 30 June Finished Goods Less: Provisions Total inventory at 30 June 29 2023 $000 2022 $000 1,353 275 (256) 1,293 197 (388) 1,372 1,102 2023 $000 2022 $000 1,293 1,472 (1,412) 1,353 275 (256) 907 854 (468) 1,293 197 (388) 1,372 1,102 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 12. Current tax assets Current assets Income tax receivable Note 13. Property, plant and equipment Non-current assets Land (at fair value) Buildings (at fair value) Plant and equipment - at cost Less: Accumulated depreciation Capital works in progress 2023 $000 2022 $000 415 716 2023 $000 2022 $000 11,125 3,388 14,513 26,516 (23,004) 521 4,033 4,380 6,985 11,365 43,072 (38,520) 298 4,850 18,546 16,215 Reconciliations Reconciliations of the written down values at the beginning and end of the current financial year are set out below: Balance at 1 July 2022 Additions Capital Work in Progress Revaluation increments Revaluation decrements Transfers Write off of assets Depreciation expense Balance at 30 June 2023 Balance at 1 July 2021 Revaluation Additions Disposals Depreciation expense Balance at 30 June 2022 Capital Work in Progress $000 Freehold Land $000 Buildings $000 Plant & Equipment $000 Total $000 298 223 - - - - - - 521 4,380 - - 6,745 - - - - 6,985 - - - (3,755) 285 - (127) 4,552 504 - - - - (632) (912) 16,215 727 - 6,745 (3,755) 285 (632) (1,039) 11,125 3,388 3,512 18,546 Capital Work in Progress $000 Freehold Land $000 Buildings $000 Plant & Equipment $000 Total $000 4,380 - - - - 7,165 - - - (180) 4,989 - 799 - (1,236) 16,743 - 888 - (1,416) 4,380 6,985 4,552 16,215 209 - 89 - - 298 30 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 13. Property, plant and equipment (continued) Valuations of land and buildings The basis of the valuation of freehold land and buildings is fair value. The freehold land and buildings were last revalued on 31 December 2022 based on independent assessments by Charter Kech Cramer a member of the Australian Property Institute having recent experience in the location and category of land and buildings being valued. The directors do not believe that there has been a material movement in fair value since the revaluation date. Valuations are based on current prices for similar properties in the same location and condition. The level 3 unobservable inputs and sensitivity are as follows: Description Unobservable inputs Range Land and buildings Yield 5.5% - 6.5% range Sensitivity 0.5% change would result in an increase or decrease in fair(or result in impairment) value by $1,654,000 Land and buildings Market Net Annual Income $110 - $140 psm per annum 0.5% change would result in an increase or decrease in fair (or result in impairment) value by $2,124,000 Security for Borrowings The bank overdraft, lease and business loan facilities are secured by the following: -A Registered Mortgage over property situated at 39 Wadhurst Drive, Boronia -A Registered Mortgage over property situated at 41 Wadhurst Drive, Boronia -A Registered Mortgage over property situated at 43-49 Wadhurst Drive, Boronia -A Registered Mortgage over property situated at 51-57 Wadhurst Drive, Boronia -A Registered Mortgage over property situated at 68 Wadhurst Drive, Boronia Note 14. Deferred tax Deferred Liability The balance comprises temporary differences attributable to: Depreciation Asset revaluation Prepayments Other assets Movements Opening balance at 1 July Increase/(Reduction) current tax expense Restating opening balance of DTL due to reduced tax rate Current year increase/(decrease) not recognised Closing balance at 30 June Deferred Tax Assets The balance comprises temporary differences attributable to: Employee entitlements, accruals and other Tax losses Movements Opening balance at 1 July Increase/(Reduction) current tax expense Closing balance at 30 June 31 2023 $000 2022 $000 2,699 - 247 3 2,949 1,680 1,269 - - 2,949 479 2,470 2,949 1,680 1,269 2,949 1,680 - - - 1,680 1,778 (98) - - 1,680 405 1,275 1,680 1,778 (98) 1,680 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 14. Deferred tax (continued) As at 30 June 2023 the Company has gross carried forward tax losses amounting to $27m (2022: $18m) and a further $12.3m (2022: $12.3m) capital losses which have not been recognised as assets in these financial statements. Note 15. Trade and other payables Current liabilities Trade payables Other payables Refer to note 25 for further information on financial risk management. Note 16. Borrowings Current liabilities Premium Funding 2023 $000 30 June 2022 $000 346 1,521 550 703 1,867 1,253 2023 $000 2022 $000 740 881 The company utilises a Premium Funding facility to pay its annual Insurance Premium. This facility has a 10 month term with an interest rate applicable of 2.34%. Note 17. Contract liabilities Current liabilities Contract prepayments 2023 $000 Restated 2022 $000 829 517 A prior period adjustment of $363,000 is included in the final restated balance of $517,000, refer to Note 1 for prior period adjustment details. Reconciliation Reconciliation of the written down value at the beginning and end of the current and previous financial year are set out below: Opening Balance Payments received in advance Transfer to revenue - included in opening balance Transfer to revenue - performance obligations satisfied in previous periods Prior period re-statement Ending Balance 32 2023 $000 Restated 2022 $000 517 501 (189) - - 829 254 332 (643) 211 363 517 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 17. Contract liabilities (continued) Unsatisfied performance obligations The aggregate amount of the transaction price allocated to the performance obligations that are unsatisfied at the end of the reporting period was $272 as at 30 June 2023 ($154 as at 30 June 2022) and is expected to be recognised as revenue in future periods as follows: (a) 272 during the Financial year 30 June 2024 (b) 328 as and when customer inventory is consumed Within 6 months 6 to 12 months 12 to 18 months Note 18. Employee benefits Current liabilities Employee entitlements Non-current liabilities Employee entitlements Note 19. Issued capital 2023 $000 Restated 2022 $000 829 - - 829 517 - - 517 2023 $000 2022 $000 546 490 166 314 Ordinary shares - fully paid 304,583,397 241,021,797 54,929 51,189 The following movements in ordinary shares were recorded during the past two years are as follows: 2023 Shares 2022 Shares 2023 $000 2022 $000 Balance brought forward as at 1 July Issuance of fully paid ordinary shares via placement – Tranche 1 Cost of raising Capital Employee share plan issues Forfeited employee shares 30 June 2023 30 June 2022 30 June 2023 30 June 2022 Shares Shares $000 $000 241,021,797 239,860,170 51,189 51,189 60,938,678 - 5,871,922 (3,249,000) - - 1,601,630 (440,003) 3,784 (44) - - - - - - 304,583,397 241,021,797 54,929 51,189 Ordinary shares Ordinary shares entitle the holder to participate in dividends and the proceeds on the winding up of the Company in proportion to the number of and amounts paid on the shares held. The fully paid ordinary shares have no par value and the Company does not have a limited amount of authorised capital. On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. 33 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 20. Share-based payments An employee share option plan (ESP) has been established by the Company and approved by shareholders at a general meeting, whereby the Company may, at the discretion of the Board, grant options over ordinary shares in the Company to certain key management personnel of the Company. The options are issued for nil consideration and are granted in accordance with performance guidelines established by the Board. The ESP was refreshed at the Annual General Meeting held on 28 November 2022. During the year ended 30 June 2023, the Company issued 5,871,922 ordinary shares under the rules of the ESP (2022: 1,601,630). Total expenses arising from share-based payment transactions recognised during the period as part of employee benefit expenses were as follows: Net value of shares issued/(forfeited) under employee share plan (182) 319 2023 $000 2022 $000 Movement in number of shares under Employee Share Plan Opening balance Employee Share Plan granted during the year Forfeited during the year 2023 $ 2022 $ 10,463,423 5,871,922 (3,249,000) 9,301,796 1,601,630 (440,003) 13,086,345 10,463,423 Set out below are summaries of options granted under the plan: 2023 Grant date Expiry date price Exercise Balance at the start of the year Granted Exercised Expired/ forfeited/ other Balance at the end of the year 23/02/2021 03/03/2022 09/03/2023 22/02/2026 02/03/2027 08/03/2023 $0.21 $0.20 $0.06 1,915,000 1,449,000 - 3,364,000 - - 5,543,000 5,543,000 - - - - (1,585,000) (1,149,000) - (2,734,000) 330,000 300,000 5,543,000 6,173,000 Weighted average exercise price $0.21 $0.06 $0.00 $0.21 $0.08 The weighted average remaining contractual life of options outstanding at the end of the financial year was 4.53 years (2022: 4.09 years). The fair value of options granted is estimated using the Black-Scholes option-pricing model. For the options on hand at the end of the financial year, the valuation model inputs used to determine the fair value at the grant date, are as follows: Grant date Expiry date 23/02/2021 03/03/2022 09/03/2023 22/02/2026 02/03/2027 08/03/2023 Share price Exercise at grant date price Expected volatility Dividend Risk-free Fair value yield interest rate at grant date $0.21 $0.20 $0.06 $0.21 $0.20 $0.06 0.72% 0.95% 0.95% - - - 0.60% 1.83% 3.50% $0.210 $0.200 $0.061 34 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 21. Reserves Asset revaluation reserve Share-based payments reserve 2023 $000 2022 $000 6,354 4,419 3,897 4,602 10,773 8,499 Asset revaluation reserve The reserve is used to recognise increments and decrements in the fair value of land and buildings, excluding investment properties. Share-based payments reserve The reserve is used to recognise the value of equity benefits provided to employees and directors as part of their remuneration, and other parties as part of their compensation for services. Note 22. Accumulated losses Accumulated losses at the beginning of the financial year Loss after income tax benefit for the year Accumulated losses at the end of the financial year 2023 $000 2022 $000 (33,063) (8,498) (31,903) (1,160) (41,561) (33,063) Note 23. Reconciliation of loss after income tax to net cash (used in)/from operating activities Loss after income tax benefit for the year Adjustments for: Depreciation and amortisation Share-based payments Change in operating assets and liabilities: Increase/(decrease) in receivables Increase/(decrease) in inventories Increase/(decrease) in current tax asset (Increase)/Decrease in payables (Increase)/Decrease in other provisions (Increase)/Decrease in unearned revenue Net cash (used in)/from operating activities Note 24. Dividends 2023 $000 2022 $000 (8,498) (1,160) (1,039) 182 (1,536) 319 997 270 1,172 (614) 200 (572) 7,101 (698) (188) (1,354) 277 100 (7,902) 2,861 There were no dividends paid, recommended or declared during the current or previous financial year. Note 25. Financial risk management Financial risks impacting the Company’s activities fall into three categories: a) market risk – foreign exchange and interest rate b) credit risk c) liquidity risk 35 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 25. Financial risk management (continued) Market risk In order to minimise the impact of currency fluctuation it is Company policy to transact in Australian dollars wherever possible. From time to time the Company also transacts in foreign currencies, particularly Euro and US dollars, which can give rise to foreign exchange risk as exchange rates fluctuate. At reporting date the Company has $4.4 million Cash Reserves held in its operating bank account and short term bank deposits. Forward cash flow forecasts do not project use of the bank debt facilities. Therefore the Company does not foresee any increased borrowings or consequentially a material sensitivity to interest rates. The Company holds the following financial instruments: Liquid Financial Assets Cash and cash equivalents Trade receivables and other Total financial assets Financial Liabilities Trade and other payables Borrowings, current and non-current Total financial liabilities Net financial position 2023 $000 2022 $000 4,433 3,333 7,766 (1,867) (740) (2,607) 9,214 2,257 11,471 (1,253) (881) (2,134) 5,159 9,337 Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations, resulting in a financial loss to the Company. Credit risk is closely managed and the Company has procedures to deal with credit worthy counterparties. Customer credit worthiness is reviewed on an ongoing basis and exposure to any one customer is monitored. Potential credit loss is regularly reviewed and assessed and a provision for expected credit losses would be raised if there was any evidence the debt was no longer collectible. The Company does not carry a material level of overdue debtor balances. Liquidity risk Liquidity risk arises from the financial liabilities of the Company and is the risk that the Company is not able to pay its financial liabilities as when they fall due. The ultimate responsibility for liquidity risk management rests with the Board of Directors which has established a framework for management of the Company’s requirements over time through continuous monitoring of historical and anticipated cash flows and scenario analysis. The Company manages liquidity risk by maintaining cash reserves and reserve borrowing facilities. Rolling 18 month cash flow forecasts are prepared each month. Strategic planning also includes liquidity considerations and based on current strategies, no funding shortfalls have been identified. In addition to funds on deposit, the Company has $5 million undrawn banking facilities. Fair value of financial instruments Unless otherwise stated, the carrying amounts of financial instruments reflect their fair value. Note 26. Key management personnel disclosures Remuneration arrangements in relation to Key Management Personnel (KMP) are disclosed in the Company’s 2023 Annual Report. The following table summarises cash bonuses paid to KMP in the reporting period following assessment of performance against individual and Company objectives in place for the years ended 30 June 2023 and 30 June 2022. No shares were issued within the framework of the Employee Share Plan during the period. 36 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 26. Key management personnel disclosures (continued) Directors The following persons were directors of IDT Australia Limited during the financial year: Mark Simari - Chair Jane Ryan - Non-Executive Director Geoffrey Sam OAM - Non-Executive Director Michael Kotsanis - Non-Executive Director Hugh Burrill - Non-Executive Director Alan Fisher - Non-Executive Director Appointed as Non-Executive Director 10 October 2022 and subsequently appointed Chair 1 January 2023 Appointed 10 October 2022 Resigned 28 November 2022 Resigned 10 October 2022 Resigned 31 December 2022 Other key management personnel The following persons also had the authority and responsibility for planning, directing and controlling the major activities of the Company, directly or indirectly, during the financial year: P McDonald, Chief Executive Officer Mr Vasanthakumar, Chief Financial Officer P Thiyageas, Quality Director J Sosic, Operations Director A Nesci, Commercial & Portfolio Director D Sparling, Chief Executive Officer A Desai, Chief Financial Officer C Kagiaros, Head of People and Culture Compensation The aggregate compensation made to directors and other members of key management personnel of the Company is set out below: Short-term employee benefits Post-employment benefits Long-term benefits Share-based payments 2023 $ 2022 $ 1,851,936 147,929 22,597 206,570 1,486,340 112,226 14,683 312,900 2,229,032 1,926,149 Transactions of Directors and Key Management Personnel Concerning Shares Aggregate numbers of shares acquired and disposed of by Directors or Key Management Personnel were as follows: Ordinary shares issued to KMP Ordinary shares forfeited by KMPs Ordinary shares acquired Ordinary shares sold Ordinary shares sold after limited recourse loans repaid 2023 Shares 2022 Shares 3,370,000 3,139,000 - - - 1,449,000 - 81,981 160,000 1,426,621 Other than shares issued as described in note 20, the terms and conditions of other transactions relating to shares were on the same basis as similar transactions with other shareholders. Aggregate numbers of shares of IDT Australia Limited held directly, indirectly or beneficially by Directors or KMP holding office at balance date were as follows: 37 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 26. Key management personnel disclosures (continued) Ordinary shares 2023 2022 4,746,350 4,199,106 There were no other transactions or contracts between the Company and Directors and Key Management Personnel in 2023 (2022: nil). Note 27. Remuneration of auditors During the financial year the following fees were paid or payable for services provided by Grant Thornton, the auditor of the Company: Audit services - Audit or review of the financial statements Other services 2023 $ 2022 $ 143,784 98,000 23,711 55,331 167,495 153,331 Other services During the year Grant Thornton was paid for non-audit services in relation to Taxation and R&D Tax incentive scheme related services. Note 28. Related party transactions Key management personnel Disclosures relating to key management personnel are set out in note 26 and the remuneration report included in the directors' report. Transactions with related parties There were no transactions with related parties during the current and previous financial year. Receivable from and payable to related parties There were no trade receivables from or trade payables to related parties at the current and previous reporting date. Loans to/from related parties There were no loans to or from related parties at the current and previous reporting date. Note 29. Commitments and contingencies The directors are of the opinion that there are no significant commitments and contingencies requiring disclosure for the company as at 30 June 2023. 38 IDT Australia Limited Notes to the financial statements 30 June 2023 Note 30. Events after the reporting period On 21 July 2023 the Company issued 30,769,354 Ordinary shares raising $2.0 million before costs as part of a rights issue to shareholders. On 26 July 2023 the National Australia Bank (NAB) loan facility was increased from $2.5mil to $5.0mil and the term of the facility was extended to 31 October 2025. On 1 August 2023, at the Extraordinary General Meeting of the shareholders, the following director options were approved by the shareholders: Mark Simari 6,000,000 shares, Jane Ryan 3,000,000 shares and Geoff Sam 3,000,000 shares. On 4 August 2023 the Company issued further 15,984,389 Ordinary shared raising $1.04mil before costs as part of the share placements Tranche 2. No other matter or circumstance has arisen since 30 June 2023 that has significantly affected, or may significantly affect the Company's operations, the results of those operations, or the Company's state of affairs in future financial years. 39 IDT Australia Limited Directors' declaration 30 June 2023 In the directors' opinion: ● ● ● ● the attached financial statements and notes comply with the Corporations Act 2001, the Accounting Standards, the Corporations Regulations 2001 and other mandatory professional reporting requirements; the attached financial statements and notes comply with International Financial Reporting Standards as issued by the International Accounting Standards Board as described in note 1 to the financial statements; the attached financial statements and notes give a true and fair view of the Company's financial position as at 30 June 2023 and of its performance for the financial year ended on that date; and there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable. The directors have been given the declarations required by section 295A of the Corporations Act 2001. Signed in accordance with a resolution of directors made pursuant to section 295(5)(a) of the Corporations Act 2001. On behalf of the directors ___________________________ Mark Simari Chair 28 August 2023 40 Grant Thornton Audit Pty Ltd Level 22 Tower 5 Collins Square 727 Collins Street Melbourne VIC 3008 GPO Box 4736 Melbourne VIC 3001 T +61 3 8320 2222 Independent Auditor’s Report To the Members of IDT Australia Limited Report on the audit of the financial report Opinion We have audited the financial report of IDT Australia Limited (the Company), which comprises the statement of financial position as at 30 June 2023, the statement of profit or loss and other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies, and the Directors’ declaration. In our opinion, the accompanying financial report of the Company is in accordance with the Corporations Act 2001, including: a b Giving a true and fair view of the Company’s financial position as at 30 June 2023 and of its performance for the year ended on that date; and Complying with Australian Accounting Standards and the Corporations Regulations 2001. Basis for opinion We conducted our audit in accordance with Australian Auditing Standards. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Report section of our report. We are independent of the Company in accordance with the auditor independence requirements of the Corporations Act 2001 and the ethical requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for Professional Accountants (including Independence Standards) (the Code) that are relevant to our audit of the financial report in Australia. We have also fulfilled our other ethical responsibilities in accordance with the Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. www.grantthornton.com.au ACN-130 913 594 Grant Thornton Audit Pty Ltd ACN 130 913 594 a subsidiary or related entity of Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389. ‘Grant Thornton’ refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. Grant Thornton Australia Limited is a member firm of Grant Thornton International Ltd (GTIL). GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate one another and are not liable for one another’s acts or omissions. In the Australian context only, the use of the term ‘Grant Thornton’ may refer to Grant Thornton Australia Limited ABN 41 127 556 389 ACN 127 556 389 and its Australian subsidiaries and related entities. Liability limited by a scheme approved under Professional Standards Legislation. 41 w Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial report of the current period. These matters were addressed in the context of our audit of the financial report as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. Key audit matter How our audit addressed the key audit matter Revenue & Contract liabilities – Note 1.8, Note 1.17, Note 5 and Note 17 In the financial year ended 30 June 2023, the Company Our procedures included, amongst others: recorded revenue of $6,935,000. The Company offers several products and services to its • Obtaining an understanding of the processes and controls used by the Company in evaluating contracts under the customers that require different patterns of revenue five-step model of AASB 15 Revenue from Contracts with recognition due to varying contractual terms, which impact the Customers; identification of performance obligations and the determination of how the Company satisfies those obligations. • Reviewing revenue recognition policies of the Company’s recurring and non-recurring revenue streams to ensure This is a key audit matter due to the financial significance to compliance with AASB 15; the statement of profit or loss and other comprehensive • Selecting a sample of revenue transactions to verify that income and the judgement involved in determining appropriate revenue recognition for these various services. revenue was being recognised in accordance with revenue recognition policies; • Analytically reviewing all revenue streams and investigating movements outside our expectations with management; • Completed cutoff testing to verify the revenue recognised and associated costs in relation to these transactions are accounting for in the correct periods under AASB 15 Revenue from Contracts with Customers; • Testing the accuracy of deferred income recorded by the Company during the year; and • Evaluating the disclosures in the financial statements for appropriateness and consistency with accounting standards. Carrying value of land and buildings – Note 1.14 and Note 13 As at 30 June 2023, the Company’s carrying value of land and Our procedures included, amongst others: buildings totalled $14,513,000. • Obtaining the most recent valuation reports at Land and buildings are carried under the revaluation model 31 December 2022 and assessing completeness, accuracy under AASB 116 Property, Plant and Equipment, whereby and reasonableness of key inputs and assumptions valuations are obtained cyclically, and revaluations are taken applied in the calculations in accordance with AASB 116 through the asset valuation reserve. Property, Plant and Equipment; This area is a key audit matter due to the judgement involved in determining whether the fair value of the land and buildings is materially appropriate. • Engaging our internal valuation experts to review the independent valuation report to check whether the inputs are reasonable; • Evaluating the competence, capabilities, and objectivity of Management’s expert who completed the valuation; and • Reviewing Management‘s assessment of fair value of land and buildings at 30 June 2023 to ensure the valuation at 31 December is still relevant. 42 Grant Thornton Audit Pty Ltd Going Concern– Note 4 For the year ended 30 June 2023 the Company recorded a Our procedures included, amongst others: loss after tax of $8,498,000 and operating cash outflows of $7,902,000. At year end, the Company had $4,433,000 of cash on hand, which in the opinion of the Directors will support the Company’s funding requirements for twelve months from the date of this report. Accordingly, testing the availability of sufficient funding for the Company to meet its obligations is considered a key part of our going concern assessment. This has been assessed as a key audit matter due to the judgement required by management in preparing their forecasts evaluating their ability to continue as a going concern. • Collating the results of our inquiries, observations, analytical procedures, and other testing procedures in order to form a conclusion on whether the Company’s ability to continue as a going concern is still present through the year-end; • Assessing the cash flow forecast prepared by management for at least 12 months from the anticipated date of signing the financial statements and evaluating the reasonableness of inputs and assumptions used in the forecast; • Analysing and challenging key assumptions in IDT Australia Limited’s budget for the twelve-month period from the expected date of signing; • Discussing with management their future plans for the Company; • Reviewing ASX announcements to gather an understanding of the strategy of the business; • Inquiring of management as to whether they are aware of any events or conditions beyond the period of Management’s assessment that may cast significant doubt on IDT Australia Limited’s ability to continue as a going concern; and • Evaluating the disclosures in the financial statements for appropriateness and consistency with accounting standards. Information other than the financial report and auditor’s report thereon The Directors are responsible for the other information. The other information comprises the information included in the Company’s annual report for the year ended 30 June 2023, but does not include the financial report and our auditor’s report thereon. Our opinion on the financial report does not cover the other information and we do not express any form of assurance conclusion thereon. In connection with our audit of the financial report, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial report or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Responsibilities of the Directors for the financial report The Directors of the Company are responsible for the preparation of the financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the Directors determine is necessary to enable the preparation of the financial report that gives a true and fair view and is free from material misstatement, whether due to fraud or error. In preparing the financial report, the Directors are responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so. 43 Grant Thornton Audit Pty Ltd Auditor’s responsibilities for the audit of the financial report Our objectives are to obtain reasonable assurance about whether the financial report as a whole is free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with the Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this financial report. A further description of our responsibilities for the audit of the financial report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar2_2020.pdf.This description forms part of our auditor’s report. Report on the remuneration report Opinion on the remuneration report We have audited the Remuneration Report included in pages 9 to 15 of the Directors’ report for the year ended 30 June 2023. In our opinion, the Remuneration Report of IDT Australia Limited, for the year ended 30 June 2023 complies with section 300A of the Corporations Act 2001. Responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. Grant Thornton Audit Pty Ltd Chartered Accountants M A Cunningham Partner – Audit & Assurance Melbourne, 28 August 2023 44 Grant Thornton Audit Pty Ltd IDT Australia Limited Shareholder information 30 June 2023 The shareholder information set out below was applicable as at 1 August 2023. Distribution of equitable securities Analysis of number of equitable security holders by size of holding: 1 to 1,000 1,001 to 5,000 5,001 to 10,000 10,001 to 100,000 100,001 and over Holding less than a marketable parcel Equity security holders Twenty largest quoted equity security holders The names of the twenty largest security holders of quoted equity securities are listed below: Ordinary shares Number of holders % of total shares issued 442 1,244 580 1,097 328 12.00 33.70 15.70 29.70 8.90 3,691 100.00 - - Ordinary shares Number held % of total shares issued 32,408,366 23,682,196 23,554,937 18,933,201 13,755,534 9,978,904 9,690,316 6,029,710 5,502,672 5,280,723 3,990,331 3,457,737 3,000,000 2,961,539 2,650,752 2,616,539 2,461,539 2,373,299 2,153,847 2,086,539 8.19 5.98 5.95 4.78 3.47 2.52 2.45 1.52 1.39 1.33 1.01 0.87 0.76 0.75 0.67 0.66 0.62 0.60 0.54 0.53 176,568,681 44.59 ONE MANAGED INVT FUNDS LTD - SANDON CAPITAL INV LTD A/C MERRILL LYNCH (AUSTRALIA) NOMINEES PTY LIMITED HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED ONE FUND SERVICES LTD - SANDON CAPITAL INV LTD A/C UBS NOMINEES PTY LTD CITICORP NOMINEES PTY LIMITED MR ANTHONY JOHN HUNTLEY INVIA CUSTODIAN PTY LIMITED - GRAEME LESLIE BLACKMAN A/C KEISER INVESTMENTS PTY LTD - GANN FAMILY RETIREMENT A/C PICHERIT'S FARM PTY LTD - HUNTLEY SUPER FUND A/C MR ROBERT DARIUS FRASER - FRASER FAMILY A/C INVIA CUSTODIAN PTY LIMITED - PAULENE BLACKMAN A/C BUTTONWOOD NOMINEES PTY LTD MS MELISSA MARY STEPHENS WARBONT NOMINEES PTY LTD - UNPAID ENTREPOT A/C PAUL MCDONALD ON ON FOR DON PTY LTD - MAC FAMILY A/C NEWECONOMY COM AU NOMINEES PTY LIMITED - 900 ACCOUNT MR ALISTAIR DAVID STRONG TIDE RIDER PTY LTD Unquoted equity securities There are no unquoted equity securities. 45 IDT Australia Limited Shareholder information 30 June 2023 Substantial holders Substantial holders in the Company are set out below: Sandon Capital Pty Ltd Regal Funds Management Pty Limited and assoc One Funds Management Ltd, One Fund Services Ltd Anthony Huntley and associated entities Voting rights The voting rights attached to ordinary shares are set out below: Ordinary shares Number held 50,418,489 43,578,939 31,777,934 12,828,815 % of total shares issued 12.74 11.01 8.03 3.24 Ordinary shares On a show of hands every member present at a meeting in person or by proxy shall have one vote and upon a poll each share shall have one vote. There are no other classes of equity securities. 46 IDT Australia Limited 45 Wadhurst Drive, Boronia, Victoria, 3155, Australia www.idtaus.com.au 

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